You have to give the Board of Water Supply, under the leadership of Milton Pavao, credit. While everyone else is talking about alternate energy, the Board of Water Supply is quietly doing something about it. They finished the first hydroelectric unit on Hina Lani Street this past September.

The tall unit on the left is a turbine that generates electricity. It is at the third water tank at the intersection of Hina Lani Street and Queen Kapiolani Highway in Kona.

And now they are working on another at the Kahalu‘u Shaft just above Keauhou.

The hydroelectric generator located just outside the Kahalu‘u Shaft. This generator provides electricity to the three pumps down in the shaft. Additional power is provided by HELCO.

There are three big water pumps in this shaft located above the Keauhou shopping center, just off the main highway. The Board of Water Supply generates electricity from a higher elevation source. The electricity generated will help to lower the cost of running the three pumps. Savings may be in excess of $150,000 per year. This will benefit all Board of Water Supply customers on the Big Island.

At approximately 40KW, these units are tiny compared to the big generating plants, which can be up to 700 times larger. But they can save the Board of Water Supply system more than $100,000 each. And they have plans to install these kinds of units all over the island. This will stabilize water rates and avoid our having to pay for oil from foreign governments who may not even like us.

I am interested in all this because we plan to install a similar type unit soon at our farm. But I am very concerned, because there seems to be a problem getting permitted under Schedule Q.

Schedule Q applies to small projects that are less than 100 KW in size. By contrast, geothermal is 750 times larger than that. HELCO enables the larger projects by competitive bidding. This insures lowest rates to rate payers.

Schedule Q has different goals and results. It contemplates encouraging alternate small energy production, and it encourages food security as well as economic security through enabling small producers of energy.

The first unit on Hina Lani Street, completed in September, still has not received its permit from the PUC. That is nearly six months. For half a year we haven’t avoided oil usage and Water Supply customers have not received the benefit of its use. I worry that the PUC is contemplating some other payment schedule, rather than the “avoided cost” of using oil, as was the procedure all along under Schedule Q.

Because of the uncertainty, it was suggested that we consider a different rate schedule—something called Net Metering. This means that usage would be accumulated for the month, and if we used more than we generated we would pay the net difference. But if we generated more than we used, we would just give it free to HELCO.

For us, this would make it more difficult to justify starting the project in the first place. Our project is estimated to cost more than a million dollars. And nearly 25% of the unit’s output would not contribute to the loan repayment.

But this is about more than just us. In a world where oil supplies are decreasing and where we, sitting in the middle of the Pacific, are especially vulnerable, we need to encourage more people to provide renewable energy so we can free ourselves from foreign oil. We should encourage our small businesses to produce energy, not discourage them.

Earlier in the session, we submitted a separate bill that attempts to empower farmers by enabling them to finance alternate energy projects under favorable terms. It expected that Schedule Q would continue in effect.

The benefits of this bill are:

1. Food security. If farmers make money, they will farm.

2. Energy security. The less we depend on foreign oil, the more secure we will become.

3. Economic security. If we pay our own businesses for energy instead of paying foreign government for oil, the money will circulate and multiply in our own economy.

The PUC needs to streamline the whole process and it needs to pay “avoided costs” of oil under Schedule Q.

Here is the resolution that we drew up to bring clarity to the PUC regarding the legislative intention of Schedule Q.

Since the oil shocks of the 1970s, the U.S. mainland has moved away from dependence on foreign oil for its electricity generation. Consequently, electrical generation there is mostly powered by coal, natural gas, hydro power and nuclear. The result is that a kilowatt of electricity on the mainland costs about 8 cents/kilowatt hour.

Though we generate maybe 30 percent of our energy from geothermal and other renewable sources, since contracts used to be based on “oil” costs our electricity rates are now nearly four times higher than on the mainland. This despite the fact that geothermal costs less than half what oil-generated electricity costs.

These days new alternative energy contracts are by competitive bid, so any new form of purchased energy, such as geothermal, would be at lower rates than we pay now.

We need to increase our use of geothermal power here, because overall geothermal is the least expensive of the alternate sources of electrical energy. When electrical costs and water bills rise, it is the poor that first feel the effects. We must figure out how to avoid using foreign oil, because as those prices rise it’s like a giant tax, throwing us into recession. This makes us unable to take care of the most needy.

We need to do something about this and we need to do it quickly, or the least fortunate among us will be hurt very badly.

Farming is one of the first industries to see the direct effects of rising oil prices. Fertilizer, pesticides, packaging, irrigation pumping, cooling and transportation costs are all related to oil costs.

Five years ago, when we were planning to diversify our Kea‘au Banana operation, we knew that China was growing and there would consequently be upward pressure on energy costs, so we set up our new cropping systems to prepare for rising energy costs. Oil cost $30 a barrel then. Two years ago we started noticing creeping inflation—our supply costs were rising slowly but steadily. I started reading about energy issues and I realized we were like the proverbial “frog in a pot with the temperature rising,” and that pretty soon we were going to be done. By the beginning of 2007, oil cost was around $60 per barrel.

Last October, I took my annual trip to the Produce Marketing Association trade show, which was in Houston. Coincidentally, the Association for the Study of Peak Oil (ASPO) conference was occurring the following day at the same hotel. I attended. Turns out it was the most important conference I have ever been to. What I know for sure now is that the oil shortage is real. It is happening right now and we need to come to grips with it. It is not about what we wish will happen; it is what will actually happen. It is no longer about us—now it’s about our grandchildren and their children.

I was the only person at the ASPO conference from Hawai‘i and the only one in shorts. By October, oil prices had risen to $80 per barrel. But it was apparent to me that as bleak as the future looks, we in Hawai‘i are very fortunate. First of all, we have sunshine all year long. The sun’s energy helps us grow food and generate electricity—and all year long. And, the biggest deal of all, we have proven geothermal power. Not only to heat houses, as in some places, but to actually generate electricity. I did not have the heart to tell the people I met how fortunate our situation is on the Big Island, let alone that I was going to wear shorts the rest of the winter.

It’s taken nearly three months for the information from this conference to work its way into the mainstream media. In the meantime, at the farm we have been positioning ourselves for a future of oil shortage. Several principles guide us: “The kahuna not going save us.” “Plan for the worst case.” And, most important of all, “Not, ‘no can.’ ‘CAN!’”

We are getting ready to build a hydroelectric plant that will power fifteen 40-foot Matson reefers all day long. This will stabilize our electric bill. We will then convert our farm machinery to electricity wherever possible, using battery-powered forklifts, golf carts, etc. We plan to offer our employees the ability to charge up their plug in hybrid and electric vehicles and a ration of food as an extra benefit of working at Hamakua Springs. And on and on.

We just received our biodiesel kit, which can make biodiesel out of waste vegetable oil from frying tempura. We still remember gas lines, and we want to make sure that our delivery trucks can deliver food on time. We are planning for the worst case scenario. There is no downside to our farm taking this strategic direction.

What about the bigger picture? Can we grow crops for biodiesel and ethanol? Let’s do some quick and dirty calculations. Since there are 42 gallons in a barrel of oil, at $100 per barrel each gallon costs $2.38. There are around eight pounds in a gallon of water—close enough. So, each pound of oil is worth 30 cents. If it takes two pounds of palm nuts to make one pound of oil, the maximum a farmer can expect for farming palm nuts is 15 cents per pound. At three pounds of nuts to make one pound of oil, they’d make 10 cents per pound. So there it is. Farmers aren’t going to farm at those prices. There may be other ways to produce biofuels in a significant scale in the future. Just show us the money.

That leaves electricity as the doable alternative for powering a large part of our transportation and commerce. So, we must seek to lower and stabilize our electricity costs. Besides conservation and changing building codes, we must also start to think of a future of plug in hybrid and electrical cars.

Geothermal energy can produce electricity at less than half the cost of oil and there are other natural sources where the energy source is “free”. That could give us a relative advantage over the mainland, and possibly make us a low-cost, “green” destination for visitors—where we show how maintaining our Hawaiian values in a smart way has made us truly sustainable.

Oil again reached $100 per barrel this week and we must prepare for costs to double and even triple in a few years. We must lower and stabilize our electricity costs by all means. We have the ability to do this. It’s not an option; it’s a necessity. It’s for the sake of our grandchildren’s children.

Not, “no can.” “CAN!”